Question

Testbank Multiple Choice Question 96 On June 30, 2021, when Bonita Industries's stock was selling at $66 per share, its capital accounts were as follows: Capital stock (par value $50; 58000 shares issued) $2900000 Premium on capital stock 580000 Retained earnings 4150000 If a 100% stock dividend were declared and distributed, capital stock would be $3480000. $5800000. $7656000. $2900000.

Answer 1

Answer:

$5800000

Explanation:

Stock dividend refers to a form of dividend payment whereby additional stock shares of the company are distributed to shareholders instead of paying the shareholders in cash.

Stock dividends are also known as stock spills and it increases the common stock par value by its declared percentage.

Since the a 100% stock dividend were declared and distributed, this would increase the common stock as follows:

Increase in common stock = $2,900,000 * 100% = $2,900,000.

Therefore, the new common stock would be:

New common stock = Existing common stock + Increase in common stock = $2,900,000 + $2,900,000 = $5,800,000.

Therefore, If a 100% stock dividend were declared and distributed, capital stock would be $5,800,000.